(2nd LD) Hyundai Motor's net earnings plunge 28.3 pct in Q3

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By Lee Joon-seung

SEOUL, Oct. 23 (Yonhap) -- Hyundai Motor Co., South Korea's largest automaker, said Thursday its net earnings for the third quarter plunged 28.3 percent on-year to 1.61 trillion won (US$1.53 billion), mainly due to unfavorable exchange rates that offset gains in sales.

Operating profit also dropped 18 percent to a little under 1.65 trillion won in the same period, but sales gained 2.2 percent to 21.28 trillion won, the company said in a regulatory filing.

Hyundai Motor said it sold 1,128,999 cars from July through September, up 1.8 percent from the year before when sales hit 1,109,205 units.

The company said unfavorable exchange rates took a severe toll on overall profits and canceled out benefits from the release of new car models. Hyundai released the all new Genesis premium sedan, the Sonata midsize family car, ix25 small crossover and the i20 super-mini that helped boost sales.

"The appreciation of the Korean won vis-a-vis the U.S. dollar by 6 percent in the third quarter compared to the year before led to a sharp drop in profits," the carmaker said. It added that a drop in output at its plants in South Korea further affected profitability. Union workers had staged walkouts to better reflect their demands in the annual wage negotiations that were finally resolved early this month.

The bottom line for the carmaker, the flagship of Hyundai Motor Group, the world's fifth-largest automotive conglomerate, for the first nine months of 2014 backtracked 12.7 percent from a year earlier to 5.99 trillion won, with operating profit falling 9.7 percent to 5.67 trillion won.

Sales reached 65.68 trillion won, a slight gain of 0.5 percent from 65.37 million won tallied a year earlier. The carmaker said it sold 3,624,837 units up until September, a gain of 3.6 percent from 3,500,022 cars sold in the same three quarters of 2013.

At the conference call held in Seoul, Lee Won-hee, the company's chief financial officer (CFO), stressed Hyundai is considering increasing dividend payments to investors and taking concrete steps to deal with management challenges confronting the carmaker.

"The company is mulling a mid-year dividend payment for 2015," the executive said.

He also said that Hyundai Motor Group's successful bid to buy a prime piece of real estate in Seoul, for what many argue was an exorbitant sum of 10.55 trillion won, will not exert much burden on the carmaker.

"Once permission is secured to develop the land, some 4-5 trillion won will be needed, but 2-3 trillion won of this can be recouped relatively quickly, if part of the land is leased or sold to partners wishing to build a hotel or shopping mall at the site," he claimed.

The CFO said Hyundai has some 25 trillion won in cash so it can easily cope with payment.

Critics have charged that the need to buy the land will exert negative influence on Hyundai Motor's profits for the near future.

In regards to the fourth quarter and beyond, the carmaker said it is bracing for a slowdown in demand for new cars, triggered by sluggish global economic growth and geopolitical uncertainties.

On the positive side, with newer cars reaching show windows around the world, its sales may increase and even surpass the 4.9 million annual sales target set earlier this year, according to the company.

"Every effort will be made to strengthen quality and cope effectively with all challenges so Hyundai can strive to improve its brand equity," the carmaker said. It, however, acknowledged that any gains will depend heavily on whether or not foreign exchange rates stabilize.

Despite the sharp drop in profits, Hyundai Motor's shares jumped 5.88 percent to 171.000 won on the Seoul bourse, compared to a 0.27 percent fall of the benchmark KOSPI. The company released its third-quarter results before the market closed.

Market watchers said the gains come as the quarterly earning numbers effectively met expectations.

Related to Hyundai's third quarter earnings, local analysts said sales numbers were relatively good in light of overall conditions. Some said that with the uncertainty of the quarterly earnings report behind it, Hyundai shares may move up a bit in the near future.

yonngong@yna.co.kr
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